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Commercial auto ride-hailing coverage has 'taken off' for Allstate

Allstate Corp.'s new approach to the commercial auto business has it poised for outsize expansion in that market.

Thanks in large part to growth in Allstate's shared economy business, including an arrangement with Uber Technologies Inc. to provide commercial auto coverage for riders and drivers in 15 states, the company reported growth rates in commercial lines premiums written of 37.6% and 36.7%, respectively, in the third quarter and first nine months of 2019.

A review of statutory data reported by Allstate's U.S. property and casualty subsidiaries finds particularly rapid growth in the group's commercial auto liability business in recent quarters. Direct premiums written in that business line surged 55.2% year over year in the third quarter to $209.4 million. It was the seventh consecutive quarter in which Allstate's commercial auto liability premiums increased by at least a double-digit percentage. The start of the expansionary period coincided with Allstate's announcement of the Uber commercial auto partnership in the first quarter of 2018.

More broadly, Allstate's U.S. P&C units reported $475.7 million in commercial lines business in the third quarter outside of the commercial auto liability and physical damage coverages, which amounted to an increase of 3.1% on a year-over-year basis. That significantly lagged the commercial auto liability business, but still represented the group's fastest growth in the non-auto commercial lines in nearly five years.

When asked during an appearance at a Dec. 11 investor conference about Allstate's ability to leverage its agency distribution force to penetrate the small commercial market, Chairman, President and CEO Thomas Wilson said writing that sort of business "is a good opportunity for us."

At the same time, he conceded that the company "mispriced" the market in the past and "lost money on it."

"We're not into growth unprofitably, and so we reduced the size of that business to where it is today," Wilson added.

To that end, statutory data show Allstate's commercial auto liability direct premiums written contracted on a year-over-year basis five times during a six-quarter stretch ended Sept. 30, 2017. The group's non-auto commercial lines writings declined for 12 consecutive reporting periods before they plateaued in the first quarter of 2019. That business peaked in the third quarter of 2015 at $500.4 million in written premium.

"What's ... happened in the meantime is, as we were getting that business position, the shared economy business has taken off for us," Wilson said in discussing the rapid commercial lines growth the company experienced through the third quarter. Allstate's ride-hailing company partners "really like our claims," he said, during a time when they are "all of a sudden figuring out that risk management is a big part of their cost structure."

Executive Vice President and CFO Mario Rizzo described the ride-hailing business as being something of a "hybrid" between traditional personal and commercial lines coverage. Wilson said that policy limits are "a lot higher" than personal auto, and the claims process can be more complicated in that insurers need to identify and locate the riders who were in the vehicle at the time an accident occurs.

Allstate executives do not anticipate that the company's agents will be putting a lot of their attention into commercial lines business over the next year and a half or so. But the company will continue to expand its commercial lines writings, as Wilson said Allstate is "really leaning in heavy on the shared economy piece."

State-level data for 2018 shows the extent of the company's success in that regard. The company's direct premiums written in the combination of the commercial auto liability and physical damage lines increased most rapidly in the three states where the partnership with Uber initially took effect: Illinois, Wisconsin and New Jersey. With respective year-over-year growth rates of 1,244.8% and 295.9% in 2018, Illinois and New Jersey surged to the top of the list of Allstate's largest commercial auto states with direct premiums written of $117.4 million and $103.8 million, respectively.

In New York state, where Allstate and Uber teamed up for a commercial auto offering for all rides originating outside the five boroughs of New York City effective at the end of June 2018, commercial auto direct premiums written rose 54.5% to $68.4 million.

Allstate's expansion is not reflected to nearly the same extent in terms of the number of commercial auto policies in force. The company reported growth of 2.7% in Allstate-brand commercial lines policies in force for the first nine months of 2019, as the shared economy agreements typically reflect contracts that cover multiple drivers, as opposed to individual drivers.